Mongolia is sparsely populated, natural resources richly endowed and one of the rapidly developing country in the world. In addition, it has 50 million live stocks and relatively large scale land. It seems like there is no way to be poor. But why is Mongolia remaining poor? One of the reasons why this is happening is that Mongolia exports raw materials for low price, in turns imports final goods for expensive price.
Generally, FDI is one of the possible source to finance for developing economies, however policymakers need to minimize potential risks. On the other hand, for host countries, it can contribute to technology diffusion, economic growth, employment opportunities, and sustainable development. Thus, government of Mongolia has tried to attract FDI in order to boost the economy. Unfortunately, FDI only invested for mining sector.
Logically, mineral wealth should promote economic growth, because natural resource expands the production possibilities of an economy. Unfortunately, mineral wealth became a curse for Mongolia. Mineral exports made Mongolia too much reliant on one single market, and one single sector. To avoid resource curse, Mongolia may change the direction of FDI into industrial sector and implement appropriate policies.
Therefore, this research paper tried to demonstrate the current economic situations and problems, moreover make policy recommendations based on other countries’ cases.